MUMBAI: A Deutsche Bank report today said that all is not as bad as it is being made out to be about the country and that there can be some positive surprises in the offing, as the economy is still fundamentally strong and pro-growth measures are being rolled out.

Noting that the consumer demand is still strong and the country still remains a relatively attractive destination for investors with the rising global turmoil, the report said, "There may be an undue concentration of pessimism, which may be ripe for some upside surprise, as the economy is not dysfunctional," Deutsche Bank chief economist Taimur Baig said in a research note.

The German bank said the report was prepared after its research representatives recently met with policy advisors and economic and political thinkers in New Delhi.

Though there are domestic as well as global risks, the report notes that "despite the ongoing slowdown, the economy remains characterised by strong consumer demand, nimble business owners and continued goodwill from foreign investors as well as NRIs, thus job creation has not been impacted, nor have capital inflows."

Though it notes that the consensus is bearish on the country with strong macro headwinds, weak policy momentum and mounting political uncertainties, when growth supportive policy measures are taken, there will likely be a positive feedback as typical problems associated with a dysfunctional economy which is marked with excessive corporate and household leverage, pessimistic consumers, financial sector stress, etc) are not yet a part of the India story.

Secondly, the report notes policy is not in total paralysis. While far from satisfactory, there is movement in New Delhi to get infrastructure spending going and provide further investment incentives.

Third, the report says, "We may have already seen the worst of the macro environment, with a rising likelihood of growth bottoming out and inflation having peaked. Finally, given the fiscal and financial stagnation in the industrial world, India remains a relatively attractive destination for investors."

Despite these optimism, the report, which is mildly constructive on the macro front and has only limited optimism about the structural reform agenda, says the macro environment remains hostage to further slowdown in global growth and financial events in Europe.

On the impact of European and US monetary easing measures, the report said, "More monetary accommodation in the US and Europe could cause yet another global commodity price rally, undermining India's inflation and fiscal outlook."

On the political side, it says political tension could rise further, causing more damaging policy slippages.

However, the report concludes that even as the ruling political leadership continues to struggle, we are cautiously optimistic that between the finance ministry and the RBI, at the very least infrastructure spending, will be revived and some monetary easing would take place.